Boardroom battle is brewing

Disgruntled investors have been lining up well-qualified candidates to possibly take over from long-serving directors

Disgruntled minority shareholders at

Cape Town-based empowerment company Grand Parade Investments (GPI) are intent on beefing up lean returns by shaking up the board of directors. But GPI’S long-serving directors seem affronted that their servings are so underappreciated.

This should make for an intriguing general meeting at the end of this month — perhaps recalling the excitement of 2007, when an unlisted GPI was desperately fending off Shaun Rai’s Cape Empowerment Trust.

At the time of going to press, GPI was trading at a discount of more than 70% to an intrinsic NAV underpinned mainly by the SA master franchise for fast-food icon Burger King, as well as significant minority holdings in top casino property Grandwest, alternative gaming business Sun Slots and restaurant conglomerate Spur Corporation.

Such a large discount — given that investment trusts traditionally offer discounts between 15% and 25% — would usually point to strategic stagnation or iffy assets.

Neither really applies to GPI. But investors could postulate that the gaping discount speaks to poor capital allocation over the past six years, when a decision was taken by GPI to lighten its core gaming holdings and mobilise proceeds to change the group from an investment company into an operating company with a focus on food assets.

The GPI share price is also around 70% down from a late 2014 peak of 715c. The dividend, one of GPI’S enduring attributes, was also slashed in the past financial year.

Perhaps more critically, the record will show that since 2013 GPI has spent around R750m on rolling out the Burger King brand (which now numbers close to 90 stores), the net result being an unappetising accumulated headline loss of R220m. Notwithstanding the lack of profitable traction at Burger King, GPI made further forays into the food sector with smaller investments in coffee and confectionery brand Dunkin’ (formerly Dunkin’ Donuts) and ice cream business Baskin-robbins.

On top of that, investments in Mac Brothers (a catering supply firm), a meat plant and a bakery have not yet shown any promising supplychain benefits. The meat plant and Mac Brothers were acquired from a company aligned to a key GPI executive, and the deal valuations may well be sternly interrogated considering the subsequent performance of these assets.

A rough calculation shows that GPI has pumped around R1bn of capital into the various food businesses. If the cumulative losses are tallied up for the past two financial years then this number is considerably larger than GPI’S market cap of R1.1bn.

But perhaps the most startling example of poor capital allocation was a decision to bolster an initial 10% empowerment stake in Spur by acquiring further shares on the open market.

In late 2016 GPI expressed a willingness to